Want to Upgrade Your Home Without Selling Your Current Property?

With all the talk in the media about property prices falling, you might be thinking this could be a great opportunity to upgrade your home.

But there's a problem.

While you might love the idea of buying your next home in a softer property market, you might not be quite so enthusiastic about selling your current home in that very same market!

So, does that mean you need to put your plans on hold?

Not necessarily.

Depending on your circumstances, there may be ways to purchase your next home without having to sell your existing property straight away — or potentially without selling it at all.

Let's look at two options worth considering.

Option 1: Buy Before You Sell Using Bridging Finance

Bridging finance is a type of home loan that can allow you to purchase your next property before selling your existing one.

Put simply, it helps bridge the gap between buying your new home and receiving the proceeds from selling your current property.

Traditionally, homeowners often feel they need to sell first to know exactly how much money they'll have available for their next purchase.

But bridging finance can potentially give you the flexibility to reverse that process.

For example:

Let's say you've found a property you'd love to upgrade to, but you're reluctant to sell your existing home while the market is softer.

Depending on your financial position and the lender's requirements, bridging finance may allow you to purchase the new property now, while giving you additional time to sell your current home.

Some lenders offer bridging periods of up to 12 months.

That could give you more time to prepare your property for sale, find a suitable buyer and potentially avoid feeling pressured into accepting an offer simply because you've already purchased another home.

However, it's important to understand that bridging finance doesn't guarantee you'll achieve a better sale price by waiting.

Property prices could remain unchanged or fall further, and bridging finance can involve additional interest costs, fees and lending requirements.

You'll also need to consider what happens if your existing property doesn't sell within the agreed bridging period.

Option 2: Keep Your Existing Home and Turn It Into an Investment Property

Here's another possibility that some homeowners may not have considered.

What if you didn't sell your current home at all?

Depending on your available equity, income and borrowing capacity, you might be able to retain your existing property, rent it out and purchase your next home as well.

Rather than selling an asset you already own, you could potentially turn it into an investment property.

The rental income may help offset some of the costs associated with retaining that property, while allowing you to move into a home that better suits your needs.

And if property prices increase over time, you may continue to benefit from any capital growth on your existing property.

Of course, there's no guarantee that property values will rise.

You'll also need to consider the ongoing costs of owning an investment property, including loan repayments, maintenance, insurance, property management fees and potential periods without rental income.

Importantly, just because you have equity in your current property doesn't automatically mean you'll be able to borrow enough to purchase another one.

Lenders will still need to assess your ability to service the debt, taking into account your income, living expenses, existing commitments and any acceptable rental income.

There can also be tax implications when converting your former home into an investment property, so obtaining appropriate tax advice is important.

Which Option Could Work for You?

The answer will depend on your individual circumstances.

For some people, selling their existing home before purchasing another property may still be the most practical and financially sensible approach.

For others, bridging finance could provide some valuable flexibility.

And for homeowners with sufficient equity and borrowing capacity, retaining their existing home as an investment property could be another option worth exploring.

What's important to understand is that different lenders have different policies when it comes to bridging finance, rental income, existing debts and borrowing capacity.

That means the options available to you can vary considerably depending on which lender you're dealing with.

Before You Sell, Find Out What's Possible

If you're thinking about upgrading your home, it could be worth exploring your finance options before putting your existing property on the market or making an offer on another home.

You might discover that selling first isn't your only option.

As a mortgage broker, I can help you understand your borrowing capacity, compare different lenders' policies and explore whether bridging finance or retaining your existing property could be realistic options for you.

Because when it comes to upgrading your home, you might actually have more flexibility than you think.

My Mortgage Matters is based on the Gold Coast and assists clients Australia-wide via phone and video appointments.

SFTKOG Pty Ltd ACN 695 271 400 trading as My Mortgage Matters ABN 11 695 271 400 Credit Representative 558420 is authorised under Australian Credit Licence 389328.

Disclaimer: This content provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. Subject to lenders credit assessment with terms and conditions, fees and charges and eligibility criteria apply.